Indonesian Palm Oil Exports Seen Holding Near 2-Month Low

By Yoga Rusmana and Eko Listiyorini -
Aug 16, 2013

Palm oil shipments from Indonesia,
the biggest producer, were probably little changed last month
from the two-month low in June as higher local prices lured
importers to cheaper supplies from Malaysia. Futures rose.

The country shipped 1.62 million metric tons from 1.619
million tons in June, which was the lowest level since April,
according to the median of estimates from two traders, two
plantation company executives and an industry group official
compiled by Bloomberg. Output rose 0.8 percent to 2.4 million
tons. Reserves fell 2.1 percent to 2.35 million tons, the lowest
since June 2012, the median of four estimates showed.

Futures traded in Kuala Lumpur dropped 20 percent in the
past year, plunging to the lowest level in more than three years
last month, as global supplies of the most-consumed cooking oil
exceed demand. While that trimmed prices in Indonesia, they were
still higher than those in Malaysia, the second-biggest producer.

“Indonesian CPO is at a premium over Malaysia,” said
Joelianto, trading director at PT Sinar Mas Agro Resources and
Technology, referring to crude palm oil by its initials. “And
there’s the export tax that makes shipments even more
expensive.”

The tax on shipments from Indonesia was 10.5 percent in
July, according to government data compiled by Bloomberg. That
was more than double the 4.5 percent rate in Malaysia. Both
countries kept the rates unchanged this month and Malaysia’s
customs said today the tariff would be the same for September.

The Indonesian Palm Oil Association, which doesn’t publish
output and inventory figures, may release export data next week.
The forecasts for changes in reserves and production in July
were derived by Bloomberg compared with earlier survey findings.

Domestic Prices

Palm oil in Indonesia at Dumai and Belawan ports on a free-on-board basis dropped 5.4 percent to $750 per ton last month,
while supplies for local delivery in Malaysia fell 3.2 percent
to 2,290 ringgit ($699), according to data compiled by Bloomberg.
Futures gained 0.9 percent to 2,339 ringgit a ton on the Bursa
Malaysia Derivatives today. The most-active contract touched
2,137 ringgit on July 26, the lowest since October 2009.

World stockpiles of the oil that’s used in everything from
candy to biofuel will surge 21 percent to a record 9.7 million
tons by the end of 2013-2014, while demand expands 4.6 percent,
the least in 12 years, the U.S. Department of Agriculture says.

While supplies will continue to rise as output typically
accelerates in the second half because of growing cycles,
imports may slow from the biggest buyers India and China.

Weak Demand

“The demand will probably remain weak until the year
end,” said Joelianto whose company is a unit of Singapore-based
Golden Agri-Resources Ltd. (GGR), the second-largest palm producer.

Imports by India fell for the first time in three months in
July, dropping 5.2 percent to 568,254 tons from July 2012, after
a slump in the country’s currency increased costs for refiners,
the Solvent Extractors’ Association of India said Aug. 14.

Output has started to climb as the peak-production period
starts, said Fadhil Hasan, executive director at the association,
which represents the country’s growers and refiners.

In Malaysia, exports rose 0.5 percent to 1.42 million tons
in July from a month earlier, the country’s palm oil board said
Aug. 14. Output gained 18 percent to 1.67 million and reserves
increased 1 percent to 1.66 million tons.